Supreme Court creates new standard for inducing patent infringement

The statute seems clear enough. Section 271(b) of the Patent Act states, “Whoever actively induces infringement of a patent shall be liable as an infringer.”

But what does “actively induce” mean? Must a company know that its actions will cause another to infringe a patent? Or is a less culpable mental state—such as deliberate indifference—enough to create liability?

The answer is important for almost every business that owns patent rights because inducement is often a vital tool for stopping infringement. It is particularly important to companies that own method patents, such as pharmaceutical companies and online businesses. (Such companies typically own, respectively, patents on methods for administering drugs and performing an activity online.)

The Federal Circuit, in 2010, held that deliberate indifference could create liability. The court found that Global-Tech Appliances Inc. was guilty of inducing infringement because the company knew it might be inducing others to infringe, yet Global-Tech intentionally disregarded this risk.

Global-Tech appealed, and on May 31, the Supreme Court affirmed the Federal Circuit’s decision. However, the court in Global-Tech Appliances, Inc. v. SEB S.A. rejected the Federal Circuit’s “deliberate indifference” standard and replaced it with a tougher “willful blindness” standard. But applying that standard, the high court still found Global-Tech liable for inducement.

Although the willful blindness standard didn’t help Global-Tech, it may be a boon for others accused of inducement. The standard will make it harder for them to be convicted of inducing infringement.

How much harder? No one knows. “It will take a while for the lower courts to flesh out what constitutes ‘willful blindness,’” says Timothy Teter, a partner at Cooley. “There will be a lot of litigation to sort out what it means.”

Willful Blindness

The Supreme Court held that in order for a defendant to induce patent infringement, the defendant must cause another to engage in behavior that the defendant knows is infringing. But the court ruled that a defendant cannot escape liability by intentionally avoiding the knowledge that the induced acts are infringing. Such willful blindness, the court noted, indicates a defendant is aware his actions are quite likely unlawful.

Writing for eight members of the court, Justice Samuel Alito laid out the test for willful blindness: “(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.”

In this case, Global-Tech took a number of actions that the court found to be damning. The Hong Kong-based company, in an attempt to create a deep fryer for U.S. customers, conducted market research on deep fryers and deliberately decided to copy a popular fryer SEB sold in the U.S. Global-Tech then copied an overseas model of the SEB fryer, which Global-Tech knew wouldn’t have any U.S. patent markings. And when Global-Tech hired a U. S. attorney to provide an opinion letter on the company’s ability to lawfully sell its fryer in the U.S., the company failed to tell the attorney that the fryer’s design had been copied. (The attorney failed to uncover SEB’s patent on the fryer, and he gave Global-Tech a green light to market its fryer in the U.S.)

The Supreme Court put particular emphasis on Global-Tech’s withholding information from its U.S. patent counsel. “[W]e cannot fathom what motive [Global-Tech] could have had for withholding this information other than to manufacture a claim of plausible deniability in the event that [the] company was later accused of patent infringement,” Justice Alito wrote.

Standard Still Unclear

The case against Global-Tech was unusually strong, according to many experts. “This is a particularly unsympathetic defendant,” says Thomas Fitzpatrick, a partner at Goodwin Procter. “There’s no way to read what these guys did other than that they were willfully blind.”

It is unclear, however, what will happen to a less egregious defendant. For instance, while deliberately withholding important information from one’s patent attorney is clearly a red flag, would a defendant be safe if it simply didn’t seek an opinion letter? Or would the failure to seek an opinion letter be evidence of willful blindness? Experts disagree on the answer. “We will have to see how that shakes out in the courts,” says Jeffrey Lewis, a partner at Patterson Belknap Webb & Tyler.

What if a business fails to do a thorough patent search before bringing a new product to market? That shouldn’t create liability for inducing infringement, according to some experts. “That conduct may show deliberate indifference, but that isn’t willful blindness,” Fitzpatrick says. He notes that in order to stay competitive in the rapidly innovating technology sector, businesses often skip thorough patent searches so they can quickly bring new products to market.

Patent Sideshow

The Global-Tech decision seems to benefit defendants by making it tougher to prove inducement.

“The Supreme Court indicated it would be more difficult to sustain a claim of inducement of infringement in cases that did not meet the kind of fact pattern in our case,” says Norman Zivin, a Cooper & Dunham partner, who represented SEB in the litigation.

However, the ruling may create new opportunities for patentees. “This may introduce a whole new sideshow in patent litigation, with the plaintiff trying to bring in jury instructions on willful blindness,” Teter says.

Such jury instructions could put the lawsuit in a whole new light.

“This may allow plaintiffs’ lawyers to introduce a false element of morality into these cases: The defendant should have done more to avoid being willfully blind,” Teter says. “As a defendant, you want to keep this jury instruction out of the case because whenever morality becomes involved, it can be very detrimental to the defendant. It is very confusing to the jury, especially in cases where the defendant didn’t copy the plaintiff’s invention, but independently came up with the invention.”

Many patent applicants will respond to Global-Tech by changing the way they claim their inventions. Clever drafting may enable patentees to protect their inventions without having to succeed in the difficult task of proving inducement. For instance, Lewis says, “an applicant may be able to claim the individual steps in a method, so if a defendant violates a part of the method, you have the defendant for direct infringement. You don’t need to use inducement.”